Dr Dev Kambhampati | USITC- South Korea Demand for US Beef

1. Web Version:
January 2013
Author:
John Giamalva1
Abstract
This paper uses a price-adjusted index of demand to estimate the change in
Korean consumers’ demand for U.S. beef from 2003 through 2011. The paper
provides an overview of Korea’s consumption, production, and imports of beef
over this period, which included Korea’s ban on imports of U.S. beef following
discovery of bovine spongiform encephalopathy (BSE) in the U.S. cattle herd in
December 2003, the signing of the U.S.-Korea Beef Protocol in April 2008, and
the subsequent recovery of U.S. beef imports. The paper also includes back-
ground information on BSE and Korean consumers’ perceptions of the safety of
U.S. beef. Korean demand for U.S. beef is estimated to have increased substan-
tially since 2009 (the first full year after signing of the Beef Protocol), but in 2011
remained well below the level observed in 2003.
1 This article represents solely the views of the author and not the views of the United States International
Trade Commission or any of its individual Commissioners. This paper should be cited as the work of the author
only, and not as an official Commission document. Please direct all correspondence to John Giamalva, Office of
Industries, U.S. International Trade Commission, 500 E Street, SW, Washington, DC 20436, or by email to John.
Giamalva@usitc.gov.
Korea’s Demand for
U.S. Beef
Suggested citation: Giamalva, John. “Korea’s Demand for U.S. Beef.” Journal of International
Commerce and Economics. Published electronically January 2013. http://www.usitc.gov/
journals.

2. Korea's Demand for U.S. Beef
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INTRODUCTION
In 2003, Korea was the second-largest export market for U.S. beef, after Japan.2
In December 2003, a dairy cow in Washington State was discovered to have bovine spongiform
encephalopathy (BSE), and in response many countries, including Korea, closed their markets
to U.S. beef. Since the discovery of BSE, U.S. beef producers and regulators have put in place
a series of measures designed to control the risk of BSE, and in 2008 an agreement to reopen
Korea’s market to U.S. beef, the U.S.-Korea Beef Protocol, was reached. Since then, Korea’s im-
ports of U.S. beef have resumed, but at a much lower volume. This paper will examine Korean
consumers’ demand for U.S. beef, compared to demand in 2003, and since 2009, the first full
year after imports resumed. This will help determine the extent to which improved access to the
Korean market would be expected to lead to greater exports of U.S. beef.
Since 2003, changes have occurred in the Korean beef market that have led to a decline in
Korean consumers’ demand for U.S. beef. There have been changes in Korea’s domestic produc-
tion of beef and pork, as well as changes in the volume and composition of Korea’s beef imports
from other sources, particularly Australia. Additionally, the discovery of BSE in the U.S. cattle
herd and errors made in U.S. beef shipments to Korea have reportedly undermined Korean
consumers’ perceptions of the safety of U.S. beef. (See box 1 for a description of BSE.)
The goal of this paper is to estimate changes in Korean consumers’ demand for U.S. beef relative
to a base year of 2003 and since 2009, the first full year after trade was resumed. A price-adjusted
index of demand will be used to estimate Korean consumer’s demand for U.S. beef through
2011. A price-adjusted index of demand compares the actual quantity purchased (in this case,
imported) to the quantity that would be expected had there been no change in demand. The
index will control for changes in population, price, and inflation. The paper will also identify
possible causes for the changes in demand.
KOREA’S MARKET FOR BEEF
Domestic Production
The closure of the Korean market to U.S. beef in 2004 led to higher beef prices in Korea, which
stimulated domestic Korean cattle and beef production (table 1). Cattle numbers and beef pro-
duction increased more than 50 percent in 2003–11. Domestic beef production as a share of to-
tal beef supply (self-sufficiency ratio) reached a high of 45 percent in 2009, but dropped slightly
in 2010 and 2011 as imports expanded rapidly with the reopening of the Korean market to U.S.
beef in 2008.3
2 Korea was the third-largest export market by volume, after Japan and Mexico. USDA, Foreign Agricultural
Service (FAS), Production, Supply, and Distribution (PS&D) database.
3 USDA, FAS, PS&D database.

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Korea's Demand for U.S. Beef
Box 1 BSE in the U.S. Cattle Herd
There have been a total of four cases of BSE in the U.S. cattle herd. The first case, identified in
December 2003, occurred in a Canadian-born dairy cow. The three subsequent cases were found
in cattle born in the United States. The second case occurred in a Texas cow that was initially tested
in November 2004, and confirmed in June 2005. The third case occurred in a cow in Alabama that
was initially tested in February 2006 and confirmed in March 2006. The latest case occurred in a
California cow tested and confirmed in April 2012.1
Unlike the December 2003 case, the discovery
of subsequent cases of BSE has not resulted in wide-spread closures of export markets for U.S.
beef. In response to the most recent case, which is the only U.S. case of BSE since Korea’s imports
of U.S. beef resumed in 2008, Korean officials have not banned imports of U.S. beef, but have in-
creased the inspection rate.2
BSE is a fatal neurological disease that is caused by an abnormal protein called a prion. BSE is one
of a family of transmissible spongiform encephalopathies (TSEs) that includes scrappie in sheep,
chronic wasting disease in elk and deer, and Creutzfeldt-Jakob disease (CJD) in humans. The incu-
bation period between infection and the onset of symptoms is typically three to six years. The only
way to confirm the presence of BSE is through testing of a portion of the brain (the obex) after death.
The primary source of infection for BSE is believed to be feed contaminated with prions from an in-
fected animal.3
Prions have been found in the central nervous system (brain and spinal cord) and the
distal ileum of infected animals, with lower concentrations found in the tonsils and eyes. The primary
method to prevent spread of the disease is the removal of tissues that could potentially contain the
infective agent, to ensure that these tissues do not enter the human food chain and are not used
to produce feed for animals that could then become infected. Tissues that could potentially contain
the infective agent are known as specified risk materials (SRMs). The definition of SRMs varies by
country.4
The vast majority of BSE cases have been in cattle over 30 months of age, and the infective
agent has never been found in skeletal muscle meat. When imports of U.S. beef resumed, Korea
allowed only imports of boneless beef from cattle no more than 30 months of age.
1
USDA, Animal and Plant Health Inspection Service (APHIS), “History of BSE in the United States,”
http://www.aphis.usda.gov/animal_health/animal_diseases/bse/history.shtml, accessed September 18, 2012;
USDA, “Statement by USDA Chief Veterinary Officer John Clifford Regarding a Detection of Bovine Spongiform
Encephalopathy (BSE) in the United States,” April 24, 2012.
2
Yonhap News Agency, “S. Korea to Keep Tightened Quarantine Checks on U.S. Beef,” May 11, 2012.
3
USDA, APHIS, “About BSE,” http://www.aphis.usda.gov/animal_health/animal_diseases/bse/index.shtml.
There are several different strains of BSE. The first case of BSE in the United States was of the typical or clas-
sic strain of BSE, the strain originally found in the UK, and that has been linked to variant CJD in humans. The
three subsequent U.S. BSE cases were found to be atypical strains of BSE (L-type and H-type). Some research
suggests that these atypical BSE cases may occur sporadically in older cattle, and may not be linked to con-
sumption of infected feed. (U.S. Centers for Disease Control and Prevention, “About BSE,” http://www.cdc.gov/
ncidod/dvrd/bse/, accessed September 18, 2012.)
4
In the United States, SRMs are defined as the brain, skull, eyes, trigeminal ganglia, spinal cord, vertebral
column (excluding the vertebrae of the tail, the transverse processes of the thoracic and lumbar vertebrae, and
the wings of the sacrum) and dorsal root ganglia of cattle over 30 months of age, plus the tonsils and distal
ileum from cattle of all ages.

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TABLE 1 Korea’s production, supply, and distribution of beef, 2003–11 (carcass weight equivalent)
Attribute 2003 2004 2005 2006 2007 2008 2009 2010 2011
Beginning stocks (1,000 mt) 40 61 1 3 5 10 15 47 49
Production (1,000 mt) 182 186 195 200 219 246 267 247 280
Imports (1,000 mt) 457 224 250 298 308 295 315 366 431
Exports (1,000 mt) 0 0 0 0 0 0 4 2 3
Total supply (1,000 mt) 679 471 446 501 531 551 597 660 760
Consumption (1,000 mt) 618 470 443 496 522 536 546 609 677
Self-sufficiency ratio (percent) 27 39 44 40 41 45 45 37 37
Per capita consumption (kg) 12.97 9.82 9.23 10.31 10.82 11.08 11.26 12.5 13.9
Source: USDA, FAS, Production, Supply, and Distribution database, accessed June 13, 2012.
Further increases in Korea’s cattle herd are not expected for several reasons. U.S. beef has re-
captured a significant share of Korea’s beef market since the market was reopened in 2008. Also,
Korean domestic regulations enacted in the aftermath of the recent outbreak of foot and mouth
disease (FMD), discussed below, have increased costs for Korean cattle producers. As a result,
cattle demand has fallen and cattle prices in Korea have begun to decline. Korea’s beef produc-
tion is expected to increase in the short-run, as farmers decrease cattle inventories.4
In the first
four months of 2012, cattle slaughter in Korea was 35 percent above the corresponding level of
2011. Slaughter of heifers and cows was up 63 percent.5
Imports
In 2003, Korea’s imports of beef reached a record high, and imports accounted for 73 percent of
supply. The United States, which had been a large and growing supplier of beef to Korea, sup-
plied about two-thirds of Korea’s beef imports in 2003. Australia was second with approximately
20 percent of imports.
Following the ban on imports of U.S. beef, Korea’s imports of beef from Australia more than
doubled in volume between 2003 and 2005. Korean buyers were initially unable to find suffi-
cient supplies of grain-fed beef, which is preferred in many Korean dishes. Australia produces
primarily grass-fed beef, and it took time for producers in Australia to increase the supply of
grain-fed beef. Also, Koreans prefer a limited number of cuts, and producers in Australia typi-
cally provided only full sets or half-sets.6
As a result, imports from Australia did not fully re-
place the loss of imports from the United States, and overall Korean beef imports fell by 47
percent in value and 52 percent in volume between 2003 and 2004. Since then, Korea’s global
beef imports have gradually increased, but have not reached the volume of imports observed in
2003 (table 2).
4
USDA, FAS, Korea: Livestock and Products Semiannual, March 6, 2012, 4-6.
5
The BeefSite, “High Korean Cattle Slaughter Continues,” June 13, 2012.
6 ABARE Research Report, Korean beef market, 2009, 36. Selling in “full sets” or “half-sets” forces buyers to
purchase a wider range of cuts, including some less-desirable ones, rather than the specific cuts most preferred.

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Korea's Demand for U.S. Beef
TABLE 2 Korea’s imports, by leading suppliers, 2003–11
Partner 2003 2004 2005 2006 2007 2008 2009 2010 2011
Million dollars
Australia 197.4 355.3 539.7 693.7 761.6 679.9 482.3 633.9 849.3
United States 886.6 103.2 4.0 0.0 94.0 197.1 285.5 421.6 653.0
New Zealand 71.7 138.7 178.6 163.5 161.9 155.9 88.7 120.4 156.8
Mexico (a
) 2.2 11.8 21.5 19.0 17.7 5.3 9.2 18.4
ROW 21.1 0.9 0.9 0.3 0.6 0.3 0.1 0.4 0.4
World 1,176.9 600.3 735.0 879.0 1,037.1 1,050.9 862.0 1,185.6 1,678.0
Metric tons
Australia 78,018 99,066 139,798 180,386 179,942 151,918 144,306 155,406 170,111
United States 248,645 27,790 760 8 14,112 32,446 61,527 92,649 128,445
New Zealand 28,962 47,735 51,829 49,038 44,891 42,718 36,250 38,945 39,427
Mexico (a
) 852 3,585 6,791 5,366 5,201 2,678 4,452 5,929
ROW 8,318 500 379 115 291 103 37 87 128
World 363,943 175,943 196,351 236,338 244,602 232,386 244,798 291,539 344,040
Average unit value (dollars per kg)
Australia 2.53 3.59 3.86 3.85 4.23 4.48 3.34 4.08 4.99
United States 3.57 3.71 5.25 3.80 6.66 6.07 4.64 4.55 5.08
New Zealand 2.48 2.90 3.45 3.33 3.61 3.65 2.45 3.09 3.98
Mexico NA 2.59 3.29 3.16 3.54 3.41 1.98 2.07 3.11
ROW 2.53 1.75 2.38 2.95 1.92 2.52 3.53 4.75 3.30
World 3.23 3.41 3.74 3.72 4.24 4.52 3.52 4.07 4.88
Source: Global Trade Atlas, accessed June 13, 2012.
(a) Less than $50,000 or 500 kg.
Australia has been the largest source of Korea’s beef imports in every year since 2004. The
volume of imports from Australia has declined slightly since 2006, but in 2011 Korea’s beef
imports from Australia were four times the value and nearly twice the volume observed in
2003. Australian producers now supply more of the specific cuts favored by Korean consumers.
Producers in Australia have increased the share of beef that is grain-fed to approximately 28
percent in 2007 and 31 percent in 2011.7
The changes in the composition of imports coupled
with the “clean and safe image” of Australian beef likely improved the competitive position of
Australian beef 8
in the Korean market and resulted in less demand for U.S. beef.
Beginning in early 2008, several bilateral agreements have been instrumental in reopening the
Korean market to U.S. beef.
•• The 2008 Beef Protocol: On April 18, 2008, U.S. and Korean negotiators reached
agreement to reopen the Korean market to U.S. beef. The new Beef Protocol provided
for Korean imports of boneless and bone-in beef from the United States from cattle
less than 30 months of age. Additionally, in an addendum to the Protocol, the Korean
government agreed to open the Korean market to U.S. beef from cattle of any age
7 ABARE Research Report, Korean Beef Market, 2009, 1, 36; Australian Lot Feeders’ Association, “Grain Fed
Cattle Numbers Rebound Slightly,” February 20, 2012; USDA, FAS, PS&D database, accessed June 13, 2012.
8 ABARE Research Report, Korean Beef Market, 2009, 2.

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once the United States announced its enhanced feed ban. Notice of the U.S. enhanced
feed ban was published one week after the signing of the Beef Protocol, on April 25,
2008.9
Announcement of the Beef Protocol and the enhanced feed ban were followed
by widespread public protests in Korea due to concerns about the safety of U.S. beef.10
Box 2 describes Korean consumers’ perceptions of the safety of U.S. beef.
•• Private sector initiative: Because of consumer concerns, U.S. exporters and Korean
importers agreed to a separate “transitional private sector initiative” published by the
Korean government as an addendum to the Beef Protocol. The private sector initia-
tive restricted Korea’s imports of U.S. beef to beef from cattle less than 30 months of
age “until Korean consumer confidence in U.S. beef improves.” Currently, U.S. beef
exports to Korea must be from establishments participating in the USDA Agricultural
Marketing Service (AMS) Quality Systems Assessment (QSA) program that verifies
that the beef being certified is from cattle less than 30 months of age. Other conditions
of the initiative include the requirement that beef not be sourced from cattle imported
from Canada for immediate slaughter in the United States.11
•• The KORUS FTA: The U.S.-Korea Free Trade Agreement (KORUS) was ap-
proved by the U.S. Congress on October 12, 2011 and ratified by the Korean
National Assembly on November 22, 2011. It entered into force on March 15, 2012.12
In May 2011, the United States Trade Representative announced that after KORUS
enters into force, he intends to consult with Korea under the terms of the Beef Protocol
to regain access for U.S. beef from cattle of any age. KORUS provides for the reduc-
tion and eventual elimination of tariffs on Korea’s imports of U.S. beef, but does not
directly address the Beef Protocol or the private sector initiative.
9 A ban on cattle feed containing meat and bone meal derived from cattle is considered to be an impor-
tant control step in preventing the risk of infection from BSE. The 1997 U.S. feed ban prohibited the use of most
proteins derived from mammals in the feed of all ruminants. Because of the possibility of cross-contamination, the
2008 enhanced feed ban prohibited the use of “certain cattle origin materials” in the feed of any ruminant.
10 Clemens, “U.S. Beef Faces Challenges in Korea,” Iowa Ag Review, Center for Agricultural and Rural
Development, Winter 2009, 5.
11 United States Trade Representative, letter from Susan Schwab (USTR) and Edward T. Schafer (Secretary of
Agriculture) to Minister Jong Hoon Kim and Minister Woon Chun Chung, June 25, 2008.
12 Office of the United States Trade Representative, “U.S.-Korea Free Trade Agreement.”

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Korea's Demand for U.S. Beef
Box 2 Consumer Perceptions of Safety
The discovery of BSE in the U.S. cattle herd has negatively impacted Korean consumers’ percep-
tions of U.S. beef. In addition to the BSE cases themselves, Korean public perception has been
influenced by the discovery of bones in several shipments of U.S. beef to Korea, including a vertebral
column (considered at the time to be a specified risk material or SRM by Korea) in a shipment of
U.S. beef in 2007.
In a survey conducted by the Korea Rural Economic Institute following the December 2003 ban
on imports of U.S. beef, 87.4 percent of survey respondents indicated they were concerned about
the safety of U.S. beef and only 4.2 percent said it was safe. Respondents also expressed little
confidence in Korea’s country-of-origin labeling system (COOL). A majority of respondents were
concerned about the safety of imports from Australia, and one-third were concerned about the safety
of Korea’s domestic Hanwoo beef. 1
Later surveys show that Korean consumers’ concerns over the safety of U.S. beef continued, and
were reflected in beef sales. In August 2007 when part of a vertebral column was found in a ship-
ment of U.S. beef, U.S. beef imports were suspended for three weeks. Publicity over consumer
concerns depressed demand for U.S. beef and retail sales of U.S. beef in Korea declined in August
and September, relative to July.2
In October 2007, another shipment of U.S. beef to Korea was found
to contain part of a vertebral column. In reaction, all U.S. beef exports to Korea were suspended.
At the time the Beef Protocol was negotiated (April 2008), Korean consumers reportedly considered
the risk of BSE in U.S. beef to be very high. In a May 2008 survey on U.S. beef food safety risks, 78
percent of Korean respondents agreed with the statement that “U.S. beef is not safe.”3
More than
one year after the private sector agreement that allowed U.S. beef back into the Korean market, few
consumers were willing to purchase U.S. beef. In a survey conducted in December 2009, only 21.7
percent of Korean respondents reported plans to purchase U.S. beef, and only 22.1 percent reported
having purchased U.S. beef in the past.4
1
USDA, FAS, Korea: Livestock and Products Semiannual 2004, February 5, 2004, 3.
2
USDA, FAS, Korea: Livestock and Products Semiannual 2008, February 29, 2008, 9–11.
3
U.S. industry representative, Korean market briefing for Commission staff, Seoul, Korea, June 4, 2008.
4
USDA, FAS, Korea: Livestock and Products Semiannual, March 2, 2011, 7.

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The Resumption of Imports from the United States
Following the reopening of the Korean market to U.S. beef in 2008, imports from the United
States increased significantly. In 2011, Korea’s U.S. beef imports reached 74 percent of the value,
but only 56 percent of the volume, of Korea’s U.S. beef imports in 2003. In 2011, Korea’s U.S. beef
imports accounted for approximately 22 percent of Korea’s beef consumption. In comparison,
imports from Australia, the largest supplier of Korea’s beef imports in 2011, accounted for ap-
proximately 29 percent of consumption.
The increase in imports of U.S. beef after 2008 has been due to both a decline in prices relative
to other sources of beef and marketing campaigns designed to promote U.S. beef in Korea. In
2003, the average unit value (AUV) of Korea’s U.S. beef imports was 41 percent higher than the
AUV of imports from Australia, reflecting the Korean preference for grain-fed beef. The AUV
of U.S. imports has been higher than that for imports from Australia in every subsequent year
except 2006, when Korea’s imports of U.S. beef totaled only 8 tons. In 2010, the AUV of U.S.
imports was 12 percent higher than that of Australian imports, and in 2011, the AUV of U.S. im-
ports was only 2 percent higher (table 2). The premium for U.S. beef has declined substantially,
and the decline in U.S. prices relative to those for Australian beef has likely been responsible for
some of the 2010 and 2011 gains in U.S. market share.
Since 2008, U.S. beef exporters and the U.S. Meat Exporter’s Federation (USMEF) have carried
out a series of promotions intended to raise Korean consumers’ awareness of and confidence
in U.S. beef. In 2010, the USMEF “Trust” campaign was reportedly successful in allaying some
Koreanconsumers’concernsaboutU.S.beef.SurveysconductedinDecember2009andFebruary
2011 found that the share of consumers planning to purchase U.S. beef increased from 21.7 per-
cent of those surveyed in December 2009 to 39.3 percent of those surveyed in February 2011.13
A survey in January 2012 found that the share of consumers surveyed who had purchased U.S.
beef more than doubled since December 2009, from 22.1 percent of those surveyed in December
2009 to 52.3 percent in January 2012.14
MEASURING DEMAND
A demand index can be used to estimate changes in demand over time. One method that has
been used to measure changes in demand for beef, pork, and chicken over time is the quantity-
adjusted index of demand.15
The quantity-adjusted index of demand controls for changes in pop-
ulation and inflation. For a given level of consumption and given an estimate of the own-price
demand elasticity, the actual price in any given period is compared to the price that theoreti-
cally would have been associated with that level of consumption had there been no changes in
13 USDA, FAS, Korea: Livestock and Products Semiannual, March 2, 2011, 7.
14 USDA, FAS, Korea: Livestock and Products Semiannual, March 6, 2012, 6.
15 Purcell, Measures of Changes in Demand for Beef, Pork, and Chicken, 1975-1998, 1998. The index controls
for changes in the price of the good and in population.

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Korea's Demand for U.S. Beef
demand from the base period (PD=Do
). Calculations use inflation-adjusted prices and per capita
consumption. The index is the ratio of the actual price to PD=Do
multiplied by 100.
An alternative to a quantity-adjusted index of demand is a price-adjusted index of demand. At a
prevailing price and given an estimate of the own-price demand elasticity, actual consumption
in any given period is compared to the level of consumption that theoretically would have been
associated with that price had there been no changes in demand from the base period (QD=Do
).
Calculations use inflation-adjusted prices and per-capita consumption. The index is the ratio of
the actual quantity to QD=Do
multiplied by 100. A graphical representation of the use of a price-
adjusted index of demand is presented in the Appendix, Figure A1.
As Korean beef purchasers are assumed to have little influence on the price of U.S. beef, a price-
adjusted index of demand is used in this analysis. Korean consumers’ demand for U.S. beef
relative to demand in a base year is estimated from the quantity imported in a given year at the
average unit value of imports. The price-adjusted index of demand is calculated below.
Korea’s Demand for U.S. Beef Since 2003
To calculate the price-adjusted index of demand for U.S. beef, the following data are required:
(1) the real change in U.S. beef prices in Korea, (2) Korea’s per capita consumption of U.S. beef,
and (3) the elasticity of demand. The real change in U.S. beef prices in Korea is approximated by
the change in the nominal AUV of Korea’s U.S. beef imports, divided by the change in Korea’s
consumer price index.16
Korea’s per-capita consumption of U.S. beef is approximated by the vol-
ume of imports, divided by the population.17
Several studies have estimated the Korean demand
for U.S. beef, and estimates of the demand elasticity can be drawn from this literature. These
estimates vary, but generally range between approximately -0.7 and 0.9.18
A demand elasticity of
-0.7 was used to construct table 3.19
(The Appendix presents a comparison of the price-adjusted
demand index for U.S. beef at own-price elasticities of -0.5 and -0.9.)
16 Data on Korea’s consumer price index are from the IMF, “International Financial Statistics,” http://elibrary-
data.imf.org/.
17 Consumer price index and population data were obtained from the International Monetary Fund statistical
database.
18 Henneberry and Hwang, “Meat Demand in South Korea,” April 2007, 56; Lee and Kennedy, “Effects of
Price and Quality Differences in Source Differentiated Beef,” April 2009, 246. Henneberry and Hwang found that
the price elasticity of demand for U.S. beef in Korea was -0.904. Lee and Kennedy found that the price elasticity of
demand for U.S. beef in Korea was -0.7217.
19 Estimates of the own-price demand elasticity for U.S. beef in Korea vary and the calculated price index
could be sensitive to changes in this estimate.

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TABLE 3 Price-adjusted index of Korea’s demand for U.S. beef relative to 2003, Ed
= -0.7
Year
Quantity of U.S.
beef imports (mt)
Per capita
consumption (kg)
Deflated AUV
(won/kg)
Consumption
at QD=Do
(kg) Index
2003 248,645 5.272 4,523 5.272 100.0
2004 27,790 0.587 4,372 5.396 10.9
2005 760 0.016 5,373 4.579 0.3
2006 8 0.000 3,548 6.068 0.0
2007 14,112 0.294 5,904 4.144 7.1
2008 32,446 0.674 6,098 3.986 16.9
2009 61,527 1.273 5,254 4.675 27.2
2010 92,649 1.910 4,530 5.265 36.3
2011 128,445 2.629 4,665 5.156 51.0
A demand index with 2003 as the baseline period provides an estimate of how much Korean
demand for U.S. beef has recovered since the high-water mark of Korea’s U.S. beef imports.
The inflation adjusted AUV of Korea’s 2011 imports of U.S. beef was 3.1 percent higher than in
2003. Therefore, other factors being equal, the increase in price, operating through the demand
elasticity, would be expected to lead to a very small decrease in the consumption of U.S. beef. If
the demand for U.S. beef in Korea in 2011 had been equal to that observed in 2003, Korea’s per-
capita consumption of U.S. beef in 2011 would have been 5.156 kg, compared to consumption
in 2003 of 5.272 kg. In fact, per capita consumption was 2.629 kg. The estimated demand index
in 2011, relative to 2003 was 51.0.
Sample Calculation:
Percent change in real price of U.S. beef 2003–11 = (4665-4523)/(4523) = 3.1%
Expected change in per-capita consumption = 3.1% * -0.7 = -2.2%
Expected per-capita consumption QD=Do
= (1.0 -0.022) * 5.272 = 5.156
Actual per-capita 2011 consumption of U.S. beef = 2.629 kg
Index = (2.629 / 5.156) * 100 = 51.0
Therefore, Korean consumers’ demand for U.S. beef in 2011 was far short of demand in 2003,
approximately 49 percent lower. Use of an alternate demand elasticity does not lead to a large
change in this index. As shown in the Appendix, use of an estimated demand elasticity of -0.5
or 0.9 leads to an estimated demand index of 50.7 or 51.3, respectively.

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Korea's Demand for U.S. Beef
Demand in 2010 and 2011 Relative to 2009
Comparing changes in price and consumption to a fixed base period understates changes in
later periods if there has been a substantial decline in consumption.20
For instance, Korea’s im-
ports of U.S. beef in 2010 were roughly 50 percent higher than in 2009, the first full year after the
signing of the Beef Protocol and the subsequent private sector agreement. However, this change
was equivalent to only 12 percent of 2003 consumption. It is therefore also useful to estimate
demand changes on an annual basis, using 2009 as the base period. A demand index relative to
2009 provides a measure of changes in demand since the resumption of trade.
2010
Since the resumption of imports in mid-2008, U.S. producers and organizations have heavily
promoted health and flavor aspects of U.S. beef in the Korean market. This promotion would be
expected to increase Korean consumers’ demand for U.S. beef and contribute to a higher value
for the demand index. The AUV of Korea’s imports of U.S. beef also declined in 2010, on an ab-
solute basis and relative to the AUV of imports from Australia, even though Korea’s consumer
price index increased in 2010. This decline in price would also be expected to lead to an increase
in Korean consumers’ consumption of U.S. beef. Given the increased promotion and decline in
price, an increase in import volume is attributable to both relatively lower prices for U.S. beef,
and an increase in demand.
Given the estimated demand elasticity of -0.7 and the observed 13.8 percent decline in the infla-
tion-adjusted AUV of Korea’s U.S. beef imports 2009–10, we would expect per-capita consump-
tion to have increased by 9.7 percent between 2009 and 2010 to 1.396 kg, if there were no change
in demand. In fact, Korean per-capita consumption of U.S. beef in 2010 was an estimated 1.910
kg. This yields an index value of 136.8.
Annual Demand Index Change 2009–10:
Percent change in real price of U.S. beef 2009–10 = (4530-5254)/(5254) = -13.8%
Expected change in per-capita consumption = -13.8% * -0.7 = 9.7%
Expected per-capita consumption QD=Do
= (1.0 + 0.097) * 1.273 = 1.396
Actual per-capita 2010 consumption of U.S. beef = 1.910 kg
Index = (1.910 / 1.396) * 100 = 136.8
20 Purcell, Measures of Changes in Demand for Beef, Pork, and Chicken, 1975-1998, 2008; Marsh, “Impacts of
Declining U.S. Retail Beef Demand on Farm-Level Beef Prices and Production,” November 2003, 903.

12. Korea's Demand for U.S. Beef
12 | Journal of International Commerce & Economics
2011
In 2011, the AUV of imported U.S. beef increased slightly more than the Korean consumer price
index. The higher price, all else being equal, would be expected to lead to a lower volume of
imports. Therefore the increase in 2011 was attributable to increased demand. One of the most
significant factors that likely led to a continued increase in imports was an outbreak of foot and
mouth disease (FMD) in Korea. The outbreak affected more swine than cattle, but would be
expected to increase demand for imported beef as a substitute for domestic pork. Promotions
of U.S. beef continued in 2011, which would also be expected to increase demand for U.S. beef.
In late November 2010, an outbreak of FMD was confirmed in Andong, North Gyeongsang,
Korea. The widespread outbreaks of FMD led to culling of over 150,000 cattle and over 3 mil-
lion swine in an effort to stop the spread of the disease.21
Korea also initiated widespread vac-
cination of livestock.22
On March 24, 2011, Korea lowered its FMD alert status, and on March
25 declared that the outbreak was over.23
The 150,000 cattle culled were a small fraction of the nearly 3 million head of cattle in Korea,
and Korea’s domestic beef production increased in 2011.24
However, approximately one-third
of Korea’s swine were culled in the effort to control the outbreaks of FMD, and Korea’s produc-
tion of pork is not expected to recover to 2010 levels until 2014. Korea is a major consumer of
pork, and in recent years, Koreans have consumed more than twice as much pork as beef.25
As
a competing product, beef demand would be expected to increase in response to the decline in
pork production.26
Marketing efforts to promote U.S. beef have continued. The USDA awarded an additional $1
million to USMEF for U.S. beef promotion in Korea in fiscal year 2011, and USMEF has begun
the second phase of its Trust campaign. USMEF plans to spend an additional $10 million over
the next 5 years on initiatives to expand Korea’s consumption of U.S. beef.27
An estimated 65 per-
cent of Korea’s imports of U.S. beef is used by the restaurant sector, and the current phase of the
Trust campaign includes advertisements in restaurant trade magazines, as well as ads targeting
21 USDA, FAS, Korea: Livestock and Products Semiannual, March 2, 2011, 2.
22 The Korean government announced the first vaccinations for cattle in areas surrounding FMD outbreaks in
December 2010, and expanded the vaccination effort to swine on January 6, 2011.
23 There has not been a reported outbreak since February 26, 2011. Yonhap News Agency, “S. Korea Lowers
Foot-and-mouth Alert Level,” March 24, 2011; Joongang Daily, “With FMD Over, New Precautions Unveiled by
Gov’t,” March 25, 2011.
24 USDA, FAS, Korea: Livestock and Products Annual, September 2, 2011, 12; USDA, FAS, PS&D database,
accessed June 13, 2012.
25 USDA, FAS, PS&D database; USDA, FAS, Livestock and Poultry: World Markets and Trade, April 2011, 9.
26 USDA, FAS, Korea: Livestock and Products Semiannual, March 2, 2011, 10; USDA, FAS, Korea: Livestock
and Products Annual, September 2, 2011, 10.
27 U.S. Meat Export Federation (USMEF), “USMEF Announces Expanded South Korea Initiative,” May 4,
2011.

13. Journal of International Commerce & Economics | 13
Korea's Demand for U.S. Beef
consumers.28
The continued promotion is expected to have a positive impact on Korean con-
sumers’ attitudes and perceptions of U.S. beef, following the success of past promotions.
Although the AUV of Korea’s imports of U.S. beef increased slightly more rapidly than con-
sumer prices in 2011, consumption increased over 2010 to an estimated 2.629 kg per capita,
more than twice that of 2009. The demand index relative to 2009 was 191.5.
Conclusion
There has been a substantial decline in Korean consumers’ demand for U.S. beef since 2003.
Since 2003, Korea’s domestic beef production has increased substantially, and producers in
Australia now supply more grain-fed beef and more of the specific cuts in greatest demand by
Korean consumers. The decline in demand is likely attributable to both increased availability of
substitute products and a shift in consumer preference away from U.S. beef.
Although Korea’s demand for U.S. beef in 2011 remains well below the 2003 level, demand has
increased significantly since 2009. There have not been substantial changes in the availability
of Korean domestic beef and Australian grain-fed beef as substitute products since 2009, but
there have been reported improvements in consumer attitudes towards U.S. beef. The increase
in Korean consumers’ demand for U.S. beef is likely due to these changes in consumer percep-
tions. Given the structural changes that have taken place in Australia’s beef production, as well
as Korea’s increased domestic production, demand for U.S. beef may not reach the high reached
in 2003 in the near future, but continued promotions that improve consumer perceptions of the
quality and safety of U.S. beef are expected to increase demand further.
28 USMEF, “USMEF Announces Phase 2 of U.S. Beef ‘Trust’ Campaign in South Korea.”

14. Korea's Demand for U.S. Beef
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BIBLIOGRAPHY
Australian Bureau of Agricultural and Resource Economics. Korean Beef Market:
Developments and Prospects, May 2009. ABARE Research Report 09.11.
Australian Lot Feeders’ Association media release. “Grain Fed Cattle Numbers Rebound
Slightly as Trading Environment Remains Tough.” February 20, 2012.
Clemens, Roxanne. “U.S. Beef Faces Challenges in Korea Before Reaching Full Potential,” Iowa
Ag Review, Center for Agricultural and Rural Development, Winter 2009, 5-6.
Hankooki.com. “The Government Considers to Withdraw ‘50% Open Registration’
on Beef Imported from the U.S.” http://news.hankooki.com/lpage/economy/201206/
h2012061202331221500.htm. English translation provided by USDA, FAS, Korea.
Henneberry, Shida and Seong-huyk Hwang. “Meat Demand in South Korea,” Journal of
Agricultural and Applied Economics, 39, no. 1 (April 2007), 47-60.
Joongang Daily. “With FMD Over, New Precautions Unveiled by Gov’t,” March 25, 2011.
Lee, Youngjae and P. Lynn Kennedy. “Effects of Price and Quality Differences in Source
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Marsh, John N. “Impacts of Declining U.S. Retail Beef Demand on Farm-Level Beef Prices and
Production,” American Journal of Agricultural Economics, 85(4), November 2003, 902-13.
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16. Korea's Demand for U.S. Beef
16 | Journal of International Commerce & Economics
APPENDIX
Figure A1 Graphical Example of a Price-Adjusted Index of Demand
Given the estimated demand curve represented by “Base Period Demand,” the demand index is
calculated as the actual quantity consumed in a given period divided by the quantity that would
have been consumed at that price assuming there were no changes in demand from the base
period, multiplied by 100. In this example, the demand index is equal to (6 /4.65)* 100 = 129.
The estimated demand elasticity has an impact on the calculated demand index. The following
tables present Korean consumers’ calculated indices of demand using alternative estimates of
the demand elasticity, relative to demand in 2003 and 2009.
Table A1 Price-adjusted index of Korea’s demand for U.S. beef compared to 2003, Ed
= -0.5 and Ed
= -0.9
Ed
= -0.5 Ed
= -0.9
Year Quantity (mt)
Per capita
consumption (kg)
Deflated AUV
(won per kg) QD=Do
Index QD=Do
Index
2003 248,645 5.272 4,523
2004 27,790 0.587 4,372 5.360 10.9 5.431 10.8
2005 760 0.016 5,373 4.777 0.3 4.381 0.4
2006 8 0.000 3,545 5.842 0.0 6.298 0.0
2007 14,112 0.294 5,904 4.467 6.6 3.824 7.7
2008 32,446 0.674 6,098 4.354 15.5 3.619 18.6
2009 61,527 1.273 5,254 4.846 26.3 4.505 28.3
2010 92,649 1.910 4,530 5.268 36.3 5.265 36.3
2011 128,445 2.629 4,665 5.190 50.7 5.123 51.3

17. Journal of International Commerce & Economics | 17
Korea's Demand for U.S. Beef
Table A2 Price-adjusted index of Korea’s demand for U.S. beef compared to 2009, Ed
= -0.5 and Ed
= -0.9
Ed
= -0.5 Ed
= -0.9
Year Quantity (mt)
Per capita
consumption (kg)
Deflated AUV
(won per kg) QD=Do
Index QD=Do
Index
2009 61,527 1.273 5,254
2010 92,649 1.910 4,530 1.361 140.3 1.131 133.5
2011 128,445 2.629 4,665 1.344 195.5 1.402 187.6